Babuca Corporation has provided the following production and

Babuca Corporation has provided the following production and total cost data for two levels of monthty production volume. The company produces a single product. Production volume Direct materials Direct labor Manufacturing overhead$1.009.00 9.500 units 11000 units $666,60 $181.500 $1,032.400 $156.75 The best estimate of the total cost to manufacture 10,800 units is closest to (Do not round intermediate calculations.) O $1.838 650 0 $1.768.720 O $1.861.960 O $1.908.580

Solution

Direct material and direct labor are costs that vary directly with the level of activity. However manufacturing overhead is a semi variable cost and has a fixed cost element

Variable overhead per unit= (1032400 - 1009000) / (11000 - 9500) = 15.60

Fixed element = 1032400 - 11000 * 15.60 = 860800

Direct material cost = 575700 / 9500 = 60.60

Direct labor cost = 156750 / 9500 = 16.50

Cost to manufacture 10800 units = 10800 * (60.60 + 16.50 + 15.60) + 860800

= 1861960